SecProbe.io

CORRESP
1
filename1.htm

CORRESPONDENCE

Via EDGAR and FedEx

December 12,
2005

Mr. Jim
Rosenberg

United States Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549

Mail Stop 6010

Re:   BioScrip,
Inc. (f/k/a MIM Corporation)

         Form 10-K for Fiscal Year Ended
December 31, 2004

         Filed
March 4, 2005

         File
No. 000-28740

         Second
Response — to questions provided via voicemail
November 18, 2005

Dear
Mr. Rosenberg:

     On behalf of
BioScrip, Inc. (the “Company”),
we are responding to the Staff’s
follow up comments contained in the Staff’s
voicemail message left with Gregory H. Keane, the Company’s
Chief Financial Officer, on November 18, 2005, by Oscar M. Young, Jr., SEC Senior
Accountant. These follow up comments relate to the Company’s
response to the SEC’s
original comment letter dated September 16, 2005 and, specifically, to Question 1
regarding Allowance for Contractual Discounts. Set forth below is a
general background note from the Company, and then the Staff’s
comments as transcribed by the Company from the SEC’s voicemail, as well
as the Company’s responses to the comments. This letter
is being submitted via EDGAR electronic submission. We are also
providing you with a courtesy copy via FedEx for Tuesday, December 13th delivery.

General
Background Note

As part of our follow up response to the four additional
questions asked by the SEC regarding its original
question on Allowance for Contractual Discounts,
we believe a general background note would be helpful
to explain what portion of the Company’s business is
impacted by contractual allowances and
how the related billing and accounting is handled.
We believe this background will help lay the framework for our responses specifically noted below.

Overall, the Company’s revenue is split between its Specialty
Services segment — $251 million or 40% of the
Company’s revenue in 2004, and its PBM Services
segment — $379 million or 60% of the Company’s revenue in 2004.
The allowance for contractual discounts applies almost entirely to
the Company’s Specialty Services segment, where the
Company bills third party payers and patients who then pay the Company for its specialty prescription drugs.

Within the Specialty Services segment, we dispense prescription drugs from
multiple pharmacy locations utilizing different pharmacy systems to perform our billing functions. We provide distribution services in varying disease states within
these locations and concentrate in certain disease states based on the location’s expertise.

In the Specialty Services segment, over 90% ($225 million each year) of the Company’s
billing is performed on-line, where the Company bills the third-party payor electronically;
the prescription claim is immediately settled or
“adjudicated” back to us
electronically at a precise dollar amount; the revenue is then recognized
by us at that amount; and subsequently the payor pays the precise amount.
For the less than 10% (less than $25 million each year) of the Company’s
Specialty Services billing that is not adjudicated electronically, the
Company bills on paper at either a known contracted rate-at which time we recognize
the revenue at the billed and contracted rate; or the Company bills
at a usual and customary rate (similar to a list price)
if there is no  contracted rate-at which time the Company recognizes
revenue at the billed rate (usual and customary),
less an estimated reserve  (i.e., contractual allowance) to
reflect the Company's best estimate of the expected reimbursement for its services.

In these less-than-10% instances that give
rise to contractual allowance, the Company expects less-than-full
reimbursement on the usual and customary paper billed amount
because it does not have a contracted rate with the
third party payor and because many un-contracted payors
take a discount consistent with their own reimbursement rates and
policies, regardless of what they are billed. This is standard industry practice.
Overall, given the Company’s mix of business
as described above, the dollar amount of revenue to be
estimated that is subject to a contractual allowance is a
relatively small portion of the Company’s
net revenue, and the resulting allowance for contractual discounts is
also small relative to the Company’s receivable balances.

Comments
and Responses

Question 1. Clarify
how you assess the appropriateness of the allowance for contractual
discounts without tracking changes to estimates recorded in prior
years.

At the end of every month,
we review the actual write off activity that was
posted to the allowance accounts as a normal course of posting cash receipts to outstanding
receivables. In addition, we provide an estimated
amount for contractual allowances on the income statement based on the revenue booked for that month.
Also, each month we look at the historical record of activity in the allowance
account-actual monthly write offs charged against
the account and the actual monthly income statement charges that build the account.
With average receivable days sales outstanding of 45 days, our historical
write off rate provides
us with an important data point in assessing the appropriateness of the allowance balances.
That is, our allowances generally should approximate one and a half months (45 days) of
actual write off history.

We then analyze the outstanding receivables in
total and for each major payor that gives
rise to a contractual allowance against the contractual
allowance reserve balances on the balance sheet to determine if the allowance remains adequate.
Adjustments are made monthly, as judged appropriate, based on this analysis.
By performing a monthly, discrete analysis of the

appropriateness of the
allowance for contractual discounts at a location and payor level,
we do not believe that tracking changes to estimates recorded in prior years is necessary.
Also, as a general materiality point, as discussed in our general background note above,
the amount of revenue subject to an estimated contractual discount is less than 10%
of our Specialty Services segment revenue (which represents only 40% of our total Company revenue).

Further, the limited number of
payors that we bill at usual and
customary rates generally do not change their billing
and payment practices, at least not frequently,
thus minimizing the likelihood of sudden
material changes to prior period estimates.
Also, our monthly reviews of writeoffs and
charges would identify any major reductions in reimbursement that would require an increase in the reserves.

Question 2. Tell
us the specific procedures used to establish and assess the allowance.

See our
response to Question 1 above and our general background note
above.

Question 3. Justify
how you can believe that there have been no subsequent material
changes to prior period estimates when you do not specifically track
these changes.

As a general materiality point,
as discussed in our general background note above and our response to Question 1
above, the amount of revenue subject to an estimated contractual
discount is less than 10% of our Specialty Services revenue.
Further, to reiterate comments made above, the limited number of
payors that we bill at usual and customary rates
generally do not change their billing and payment practices,
at least not frequently, thus minimizing the
likelihood of sudden material changes to prior period estimates.
In addition, our monthly reviews of writeoffs
and charges would identify any major reductions
in reimbursement that would require an increase in the reserves. Also,
our receivables days sales outstanding have been at approximately 45 days,
indicating a high rate of receivables turnover.

In addition, we believe that because
we look at the individual locations and payors,
the allowance for contractual discount
reserves against the outstanding receivable balance,
and the aging of the receivables at every month-end and quarter-end
accounting close, and perform consistent analyses of these reserves,
that the reserves remain appropriate without tracking the adjustments against prior year estimates.

Question 4. Explain
how you recognize revenue when you bill at “usual and
customary” rates when they are less than contractual rates and
why that recognition is appropriate.

To clarify our initial response to the SEC’s original Question 1
(please see the second-to-last sentence in our original response),
the Company typically bills third party payors at either a known contractual rate or a
Company-established “usual
and customary”
rate. The contractual rate that we negotiate with third party
payors for a given drug is always lower than our usual and customary rate.
This is because our usual and customary rate functions as a standard (higher) list

price from which
customers may negotiate to a lower contracted rate.
Given this clarification that usual and customary
rates are always higher than contractual rates,
we believe that there may have been a
misunderstanding or miscommunication of our billing practices that would no longer require this question.

If you have any questions or comments, please do not
hesitate to contact me at (952) 979-3852.

Sincerely,

/s/  Gregory H.
Keane

Gregory H.
Keane

BioScrip, Inc.

Chief Financial Officer